A Decentralized Iron Cage: Do Chinese Local Officials Comply with the Central Government?
This paper contributes to the literature in nancial aid and authoritarian institutions.
For a long time, scholars are debating whether nancial aid is able to facilitate
development and governance. Though abundant evidence is provided, the answer is
still inconclusive. On the other hand, scholars investigating China argue that the
leadership uses various institutions to ensure local ocials' compliance. In this paper,
we nd that the nancial aid does not bring a positive impact and the central
government in China does not have enough monitoring capacity to force local o-
cials to comply. We study a redevelopment program established by Chinese central
government after the 2008 Wenchuan earthquake. By adopting a geographic regression
discontinuity combining with a dierence-in-dierences design, we show that
the redevelopment program does not signicantly develop the disaster area. On the
contrary, the evidence implies that the economy in the disaster area is worse after
receiving the aid. The results imply that local ocials do not follow the central government's
regulations and misuse the aid money for other purposes. In the future, we
expect to further investigate through which mechanism do local ocials undermine
the existing institutions.
Geographic Regression Discontinuity
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